Lou Dobbs should be a Luddite

In a provocative article entitled "Technology, not globalisation, drives wages down" in Thursday's FT by Jagdish Bhagwati, an economist at Columbia University, links the stagnation of middle class wages with the rise of information technology.

Bhagwati suggests that it's technology -- rather than either globalization or  labor unions -- that is driving down middle class (which in America means working class) wages. It's a very simple but convincing argument. Technology allows the smart class to do more for itself. So CEO's don't need secretaries, middle managers don't need typists and I -- as somebody whose writing who are now reading -- don't need a typesetter or a newspaper delivery boy to get my ideas into your head. All this results not only in job losses, but also in increasingly stagnated wages for the unskilled white collar workers lucky enough to keep their jobs:

The culprit is not globalisation but labour-saving technical changes that puts pressure on the wages of the unskilled. Technical change prompts continual economies in the use of unskilled labour.

Implicit in Bhagwati's argument is a critique of xenophobes like Lou Dobbes, who blame foreign economies and foreign workers for the crisis in middle class American wages. Instead of ranting against illegal Mexicans, Bhagwati suggests, patriotic Lou should be blaming the inventors and the entrepreneurs of Silicon Valley who -- with their automated information economy technology -- have contributed to the stagnation of middle class wages in America.

Add in the casualties caused by the internet in the retail sector -- all those workers being laid off as a consequence of the closure of book, record and video stores -- and you start to see a profound structural shift in the economy (Bhagwati calls this downward pressure on wages a "tsunami"). As banks and other parts of the financial services sector become more and more automated, so the jobs of semi skilled workers become less and less secure and their wages more and more stagnated (I don't think a bank clerk -- a traditional first rung job for a second generation immigrant to the USA -- is a very secure or well paid career these days).

So, patriotic Lou, I suggest you look at Amazon.com, Microsoft or Oracle as the real culprits of the middle class economic crisis. Jeff Bezos, Larry Ellison or Steve Jobs are much juicier target than an illegal Mexican picking oranges in the Central Valley.